This past week the markets had a lot of news to digest. The major concern over the Ukraine the prior week has dissipated as the response to the Crimean election was muted. While Russia finalizes the annexation of Crimea, Ukraine signs an EU trade pact which solidifies Europe's support and recognition of the new Ukrainian government under President Viktor Yanukovych. The response by the EU and the U.S. was to sanction Russian lawmakers and businessmen, but not Russia. The situation in the Ukraine is still evolving; but for now, the markets are less concerned. See CNN article.

The gradual slowdown of China's economy could lead to further defaults within its immense shadow banking system. This would lead to a financial crisis, and it is uncertain how China's government will respond. China will be issuing its flash PMI this Sunday night. The markets are expecting some slowdown, but a large miss will likely cause a sharp reaction. In the interim, the PBOC (China's central bank) widened the daily trading range for the yuan by 2 percent from its midpoint. This action is to improve market efficiency and allow increased two-way price swings. It is uncertain if this action will be effective, since similar actions in the past have failed. See WSJ article.

The latest policy statement and forecasts from the Fed on Wednesday caused some market jitters as concerns increased over an interest rate hike occurring earlier than expected. The Fed forecast that interest rates would increase by 1 percent by the end of 2015, and 2.25 percent a year later; these rates are higher than previously forecasted. During Fed Chair Yellen's first quarterly press conference, the news media focused on her statement that an interest rate hike could occur as early as 6-months after the completion of tapering (or mid 2015). The resulting market losses on Wednesday were recovered the next day as the markets rallied.

This past week the S&P reached new highs briefly on Friday before going negative during quadruple witching. The little economic news for the week was positive; especially the better than expected Philadelphia Fed manufacturing index (9.0 actual vs. 3.0 expected).

Equity markets world-wide, despite mid-week weakness, rallied ending positive for the week. The FTSE was up 0.4 percent; the CAC up 2.8 percent; the DAX up 3.2 percent; and the SMI up 2.2 percent.

Overall, the U.S. markets got off to a strong start on Monday as the tension in the Ukraine was diminished when Russian President Putin offered calming comments that Russia does not want to partition the Ukraine and would rely on "diplomatic and legal means" to defend its interests. The markets continued its rally on Tuesday as housing permits came in higher than expected. Wednesday saw a pullback in the markets on Fed comments only to be erased on Thursday with good economic news. Friday was choppy due to quadruple witching and heavy FedSpeak.

Economic data in the first quarter suggest increasing momentum for the second quarter, especially as the manufacturing and housing sectors are showing signs of improvement. However, the unusual cold weather in January is expected to have a negative impact on GDP for the first quarter. We expect that volatility next week will increase over growing concerns with China's shadow banking system and the continuing events in the Ukraine.

The focus next week will be on housing and manufacturing with reports from Case-Shiller and new and pending home sales, durable goods orders and the Markit surveys.

In the U.S.: More bad news for long-term unemployed; Fed's Kocherlakota blasts new rate guidance; Fitch Ratings takes US off negative ratings watch; Reasons to cheer rising rates; The winter that was: What it cost us; US manufacturing is coming back—Thank shale; US claims tick up, 4-week average hits 4 month low; Home resales drop to 19-month low; leading indicators up; Winter's snowy barrage hammers US road budgets; The Fed's new move: 'qualitative teasing'; Why equities sold off despite a dovish Fed: El-Erian; Fed shift threatens its credibility: Farr; CEOs are more upbeat on the US economy; Feb. housing starts surprise to the downside; Wall St sharply divided on 2015: CNBC survey; Manufacturing output sees largest gain in 6 months; Factory activity gears up in New York state; US claims slide to new 3-month low, raising hopes; Business inventories climb 0.4% in January; Retail sales up a bit more than expected in Feb; and Pimco: US economy to grow while China slows.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed up at 162.63. If the DIA drops, then the next level of support will be at 153.12 (weekly chart); the next level of major resistance is 165.05 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up at the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up at the midpoint.

SPY

The S&P500 (SPY) closed up at 186.20. If the SPY drops, then the next level of support will be at 173.71 (weekly chart); the next level of major resistance is 189.02 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the midpoint.

QQQ

The Nasdaq 100 (QQQ) closed up at 89.00. If the QQQ drops, then the next level of support will be at 83.74 (weekly chart); the next level of major resistance is 91.36 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD just negative, and the Stochastic moving up at the midpoint.

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Ron Berg has a BA in Economics (cum-laude) and an MBA in Accounting and Finance (honors; double major), both from Columbia University, has been trading on-and-off since the mid '70s. His first experience with options was in the '90s. He obtained the Series 7, 55, & 63 certifications and was proprietary trader for several prop firms, trading their accounts. His trading style is conservative.